New Exchanges to begin operations in Q2

Two new trading platforms for securities may start operations in the second quarter of the year. They will provide alternative platforms for investors to buy non-listed securities and for unquoted securities to stimulate access to capital.

The Nation gathered that the National Association of Securities Dealers (NASD) and the Financial Market Dealers Association (FMDA) would launch their over-the-counter (OTC) trading platforms in the second quarter.

Already, the Securities and Exchange Commission (SEC) has approved the NASD while FMDA has started initial operational arrangements after securing provisional approval from the SEC.

Market sources said both NASD and FMDA have stepped up arrangements for their trading platforms in time for them to launch within the second quarter.

Director-General, SEC, Ms Arunma Oteh, said the newly constituted board of SEC would sit on and consider granting final approval to the FMDA before the end of this month.

She hinted that NASD could possibly launch its operations in May.

According to her, the significance of the registration of the two OTC platforms for the capital market was to enhance transparency and liquidity in the trading activities of unlisted companies.

“Hitherto, trading activities of unlisted companies were never captured, thus distorting the picture of the depth of the market. The listings will assist in capturing activities on the platforms and also prepare unlisted companies for listing on the exchange,” Oteh said.

An investor and a major dealer on the NASD said the commencement of operations by the OTC platform would create significant momentum for the securities market.

The source said NASD would strive to put in place resources and technologies that would enable it to compete effectively and enhance its integrity.

On its modus operandi, NASD stated that it would seek to ease secondary market trading of all non-quoted securities in the West African region, thereby stimulating growth through more efficient capital raising processes.

A public limited liability company, NASD brings together issuers, individual and institutional investors, accredited dealers, stockbrokers, banks, central clearing systems, private equity and venture capital firms and depositories with a view to increasing liquidity in the non-quoted segment of the long term funding market.

There will be two points of entry to the NASD markets-leased trading platform and web-based bulletin board.

The leased trading platform is the structured end of the market loaded onto tested trading platform. Deals in non-quoted large cap securities will be matched automatically in this market – under conditions similar to a formal stock exchange. Trades will essentially be bilateral.

Access to trade on leased trading platform is restricted to accredited broker firms who are duly licensed by SEC. The Central Securities Clearing System will provide clearing services while settlement will be done through some select banks in West Africa.

The web-based bulletin board is the less structured end of the market that will stimulate liquidity in less liquid assets and channel capital to the more efficient issuers. Investors can identify opportunities that are not covered in mainstream investor information coverage and see trend performance of fast rising or specific interest non-quoted companies. Also, issuers can increase shareholder liquidity, manage complex capital raising exercises, identify strategic coalitions and highlight previously understated great performance. Access to this segment of the market is granted through registration and accreditation.